What Is a Good Risk-Reward Ratio? 1R vs 2R vs 3R in Our Backtests
Risk-reward ratio and win rate are two sides of one number. We show the arithmetic, then what happened when we ran the same entries with 1:1, 2:1 and 3:1 targets in 25 versions of 9 published backtests, and how long the losing streaks get at each ratio.
Guide · 25 versions comparedThe target sets the win rate. Only the entry sets the edge.
Strategies: 9 · Versions with 1R, 2R or 3R targets: 25 · Passed every gate: 0 · New tests: none
Short answer: no ratio is good on its own. 1:1 needs more than 50.0% winners before costs, 2:1 more than 33.3%, 3:1 more than 25.0%, and costs raise each bar. In 25 versions of 9 of our backtests, a bigger target always lowered the win rate; it raised the result only on trend-following entries, and no ratio turned a strategy without an edge into one that passed our tests.
00The short answer
- There is no good risk-reward ratio on its own. A 2:1 ratio needs you to win more than 33.3% of trades before costs, 1:1 more than 50.0%, 3:1 more than 25.0%. Raise the target and the win rate falls; whether you make money depends on the entry, not on the ratio.
- In our backtests the target changed the win rate every time, and the verdict never. In all 9 strategies a bigger target lowered the share of winners; on trend-following entries (the golden cross on gold and ES) it also raised the result per trade; on entries without an edge it did not. None of the 25 versions passed our gates.
- Higher ratios mean longer losing streaks. Over 1,000 trades at 2:1 with 40.0% winners, the longest losing run is about 12 trades on average; at 3:1 with 26% winners, about 20. Size your risk for that, especially under a prop firm's loss limit.
01Risk-reward ratio and win rate: the formula
If you risk 1 to make T, you break even when your win rate is 1 / (1 + T). Costs move the bar: with a cost of c (in units of your risk) on every trade, the break-even win rate is (1 + c) / (1 + T). This is the whole “risk-reward ratio vs win rate” chart in one line.
| Reward : risk | Win rate needed, no costs | Costs 0.05 R a trade | Costs 0.1 R | Costs 0.3 R (a scalper with a tight stop) |
|---|---|---|---|---|
| 0.5:1 (risk 2 to make 1) | 66.7% | 70.0% | 73.3% | 86.7% |
| 1:1 | 50.0% | 52.5% | 55.0% | 65.0% |
| 1.5:1 | 40.0% | 42.0% | 44.0% | 52.0% |
| 2:1 | 33.3% | 35.0% | 36.7% | 43.3% |
| 3:1 | 25.0% | 26.3% | 27.5% | 32.5% |
| 4:1 | 20.0% | 21.0% | 22.0% | 26.0% |
The last column is not hypothetical: on our H1 Open Trap test on gold the stop was a median $1.37 away and a $0.30 round trip cost 0.29 R a trade. At that cost a 1:1 scalper needs to win 65% of the time and a 2:1 scalper 43%. A bigger target does not reduce the cost per trade in R; only a wider stop does.
02What our backtests show: the same entries at 1:1, 2:1 and 3:1
Every row is a published test that ran one entry rule with a 1R stop and different targets, frozen in advance. Results in R per trade (R = the stop distance), before and after costs. Long-only versions where the test also had long-and-short ones.
| Strategy and market | Reward : risk | Trades | Win rate | Needed (no costs) | Before costs, per trade | After costs, per trade | Verdict |
|---|---|---|---|---|---|---|---|
| Golden cross 50/200, 1-hour, long only Gold | 1:1 | 387 | 51.2% | 50.0% | +0.025 R | -0.046 R | Buried |
| 2:1 | 387 | 36.7% | 33.3% | +0.087 R | +0.016 R | Buried | |
| 3:1 | 387 | 30.0% | 25.0% | +0.168 R | +0.097 R | Buried | |
| Golden cross 50/200, 1-hour, long only ES futures | 1:1 | 133 | 54.1% | 50.0% | +0.114 R | +0.077 R | Buried |
| 2:1 | 133 | 39.1% | 33.3% | +0.204 R | +0.167 R | Buried | |
| 3:1 | 133 | 32.3% | 25.0% | +0.307 R | +0.269 R | Buried | |
| Golden cross 50/200, 1-hour, long only EURUSD | 1:1 | 434 | 47.2% | 50.0% | -0.048 R | -0.090 R | Buried |
| 2:1 | 434 | 32.5% | 33.3% | -0.026 R | -0.068 R | Buried | |
| 3:1 | 434 | 26.5% | 25.0% | +0.052 R | +0.011 R | Buried | |
| EMA 9/20 crossover, 1-hour, long only Gold | 1:1 | 2,865 | 47.4% | 50.0% | +0.044 R | -0.026 R | Buried |
| 2:1 | 2,865 | 33.1% | 33.3% | +0.096 R | +0.026 R | Buried | |
| 3:1 | 2,865 | 28.9% | 25.0% | +0.133 R | +0.063 R | Buried | |
| EMA 9/20 crossover, 15-minute, long only Gold | 1:1 | 12,030 | 44.4% | 50.0% | -0.004 R | -0.161 R | Buried |
| 2:1 | 12,030 | 30.7% | 33.3% | +0.019 R | -0.138 R | Buried | |
| 3:1 | 12,030 | 26.2% | 25.0% | +0.034 R | -0.123 R | Buried | |
| Coppock Curve, 1-hour, long only ES futures | 1:1 | 2,981 | 41.4% | 50.0% | -0.009 R | -0.047 R | Buried |
| 2:1 | 2,981 | 35.3% | 33.3% | +0.007 R | -0.031 R | Buried | |
| 3:1 | 2,981 | 34.6% | 25.0% | +0.014 R | -0.024 R | Buried | |
| Inside bar breakout, daily EURUSD | 1:1 | 401 | 48.4% | 50.0% | -0.034 R | -0.049 R | Buried |
| 2:1 | 329 | 34.7% | 33.3% | -0.045 R | -0.060 R | Buried | |
| London breakout (Asian range) GBPUSD | 1:1 | 5,278 | 50.9% | 50.0% | +0.025 R | -0.018 R | Buried |
| 2:1 | 5,278 | 43.3% | 33.3% | +0.047 R | +0.004 R | Buried | |
| H1 Open Trap Gold | 1:1 | 9,026 | 49.2% | 50.0% | +0.006 R | -0.286 R | Buried |
| 2:1* | 8,838 | 38.4% | 33.3% | +0.003 R | -0.287 R | Buried | |
| 3:1* | 8,770 | 35.5% | 25.0% | -0.005 R | -0.294 R | Buried |
* H1 Open Trap at 2:1 and 3:1 also moved the stop to a trailing stop after +1R, as its specification said. Every row was buried under our six gates; each test's page has the details.
03What changed with the target, and what did not
- The win rate always fell as the target rose, in all 9 strategies. That is arithmetic, not a finding: a farther target is reached less often.
- On trend-following entries a bigger target helped. The 1-hour golden cross on gold went from +0.025 R to +0.168 R a trade before costs between 1:1 and 3:1; on ES from +0.114 R to +0.307 R. When an entry catches moves that keep going, cutting them at 1R throws away the tail.
- On entries without an edge it did not. The H1 Open Trap made about zero before costs at 1:1, 2:1 and 3:1; the inside bar breakout lost before costs at both 1:1 and 2:1. A target cannot create an edge the entry does not have.
- No target rescued a strategy. The best row here, golden cross 50/200, 1-hour, long only on ES futures at 3:1 (+0.269 R a trade after costs), still failed our gates (too few trades, or not better than the same trades at random times).
So the honest answer to “is 2:1 risk reward good?” is: it is good for an entry whose winners run past 2R often enough, and it does not help an entry whose edge has not been demonstrated. Test the entry first, then choose the target the entry's moves support, and decide both before you look at the results.
04Best risk-reward ratio for scalping and day trading
For short-term trading the ratio matters less than the cost in R. In our tests the same cost of a few cents or pips weighed very differently depending on the stop:
- H1 Open Trap on gold, stop at the day's extreme (median $1.37): costs 0.29 R a trade.
- London breakout on GBPUSD, stop at the other side of the Asian range (median 38 pips): 0.04 R.
- Inside bar on EURUSD daily (median 113 pips): 0.015 R.
With a 0.3 R cost, even a 3:1 ratio needs 33% winners. Before choosing a ratio for scalping, put your round-trip cost next to your typical stop.
05How long losing streaks get at each ratio
The price of a high reward-to-risk ratio is a low win rate, and a low win rate means long runs of losses even when the strategy is profitable. Exact probabilities for independent trades (no strategy data involved):
| Ratio and win rate | Trades | Expected longest losing run | Chance of 8+ losses in a row | 10+ | 12+ |
|---|---|---|---|---|---|
| 1:1 at 50% winners | 100 | 6.0 | 17% | 4% | 1% |
| 1:1 at 50% winners | 250 | 7.3 | 38% | 11% | 3% |
| 1:1 at 50% winners | 1,000 | 9.3 | 86% | 39% | 11% |
| 2:1 at 40% winners | 100 | 7.9 | 49% | 20% | 8% |
| 2:1 at 40% winners | 250 | 9.7 | 83% | 45% | 19% |
| 2:1 at 40% winners | 1,000 | 12.4 | 100% | 91% | 58% |
| 2:1 at 34% winners (break-even before costs: 33.3%) | 100 | 9.4 | 73% | 41% | 20% |
| 2:1 at 34% winners (break-even before costs: 33.3%) | 250 | 11.6 | 97% | 75% | 44% |
| 2:1 at 34% winners (break-even before costs: 33.3%) | 1,000 | 14.9 | 100% | 100% | 91% |
| 3:1 at 26% winners | 100 | 12.3 | 94% | 75% | 51% |
| 3:1 at 26% winners | 250 | 15.3 | 100% | 97% | 84% |
| 3:1 at 26% winners | 1,000 | 19.9 | 100% | 100% | 100% |
At 2:1 with 40.0% winners, a trader who takes 1,000 trades will almost certainly (91%) see ten losses in a row at some point. Risking 1% of an account per trade, that is a 10% drawdown, the whole maximum loss of many prop firm evaluations, from a strategy that makes money on average. You can check your own rules and ratio in our prop firm challenge simulator, and read what the arithmetic means for evaluations in How to Pass a Prop Firm Challenge.
06How to choose a risk-reward ratio
- Measure the entry first. Compare it with the same trades at random times; if it does not beat them, no target will fix it.
- Look at how far your winners usually run. If they often travel 3R, a 1R target leaves money behind; if they rarely pass 1.5R, a 3R target turns winners into stop-outs.
- Put costs in R and use the formula (1 + c) / (1 + T) to see the win rate you really need.
- Size for the losing streak your ratio implies, not for the average.
- Decide the ratio before testing and count every ratio you try. The best of three targets chosen after the fact is a lucky pick, not a plan.
FAQCommon questions
What is a good risk-reward ratio?
One that matches how far your entry's winners actually run. The ratio only sets the win rate you need: 50.0% at 1:1, 33.3% at 2:1 and 25.0% at 3:1 before costs. In our backtests the same entries at different ratios kept the same verdict.
Is a 2:1 risk-reward ratio good?
It is good if your entry wins more than 33.3% of the time before costs (36.7% with costs of 0.1 R a trade) and its winners often reach 2R. On trend-following entries we tested, 2:1 and 3:1 did better than 1:1 before costs; on entries without an edge they did not help.
What win rate do I need with a 1:2 risk-reward ratio?
Risking 1 to make 2, you break even at a win rate of 1 / (1 + 2) = 33.3% before costs. With costs of c times your risk on every trade, the break-even win rate is (1 + c) / 3.
What is the best risk-reward ratio for scalping?
For scalping the cost per trade in R matters more than the ratio: with a tight stop, a round trip can cost 0.3 R, and then even 3:1 needs 32.5% winners. Widening the stop lowers the cost in R; raising the target does not.
How many losses in a row should I expect at 2:1?
At 2:1 with 40% winners, the longest losing run in 1,000 trades is about 12 on average, and 91% of traders would see ten or more in a row. Size your risk per trade for that.
07Check our arithmetic
rr_collect.js · rr_data.json
08Corrections
None since publication.